A 14.6% increase in assets took total building society sector holdings past the £200bn mark to £224.8bn. These figures are drawn from building society accounts for year ends between August 2003 and April 2004.
The growth of the sector was again powered by the performance of Nationwide, which with assets of over £100bn at April 2004, represents 45% of the entire sector. Nationwide achieved asset growth of nearly 19% in 2003/04, up from 15% the previous year.
The fastest growing building society was, for the second year running, the Kent Reliance which increased its assets by over 37% to £838m. Portman also grew by 37%, with approximately half of this due to its merger in December 2003 with The Staffordshire.
Other societies achieving high levels of asset growth were the Swansea (25%), Dudley (21%), Newcastle (19%), Manchester (18%) and Chelsea (18%).
The UK's smallest building society remains the Edinburgh-based Century, with assets of just £17.6m.
Competitive market conditions contributed to a reduction in the average net interest margin at two thirds of societies. The average margin for the top 19 societies was 1.10%, down from 1.15% last year - lower than the margins of most other mortgage lenders.
The impact of this on profitability was offset, however, by close containment of costs. Nearly seven out of 10 societies reduced their management expense ratios. Amongst the top 19 societies, the average cost per £100 of assets managed is 85p, down from 90p last year.
As a result, nearly 60% of societies recorded increased profits in the year 2003/04. Market share of total mortgages outstanding remained at around 18%.
Richard Gabbertas, partner in KPMG's Financial Services practice, says: “This marks a sound performance for the building society sector in very competitive mortgage and savings markets. Growth and profitability remain strongest amongst the larger societies, and Nationwide continues to be crucial to the strength of the sector as a whole. Building societies' provisions against bad debts also fell somewhat, reflecting the continued fall in arrears levels, though retaining what may be an increased degree of caution about credit risk in a rising interest rate environment.”